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Bella Sera Homeowners' Assoc. v. Pack (In re Pack)

Ninth Circuit Bankruptcy Appellate Panel Case No. NV-14-1375-KuDJu
In the unpublished decision, the Ninth Circuit Bankruptcy Appellate Panel ("BAP") ruled that both bankruptcy court's orders "stripping off" Bella Sera Homeowner's Association ("Bella") lien and confirming Gwendolyne Pack's ("Debtor") chapter 11 plan incorrectly interpreted Nevada law. However, the bankruptcy court's incorrect interpretation was based on a later interpretation of same Nevada law by the Nevada Supreme Court in SFR Invs. Pool 1, LLC v. U.S. Bank, N.A., 334 P.3d 408 (2014). The bankruptcy court's orders were vacated and the matter was remanded to determine how much of Bella's lien will be considered as "superpriority" and how much will be "subpriority."
Procedural context:
Bella appealed the bankruptcy court's orders stripping off its lien and the order confirming the Debtor's chapter 11 plan. One of the Debtor's rental properties was encumbered by 3 liens, the first position Deed of Trust held by Wells Fargo Bank, N.A., second position Deed of Trust held by U.S. Bank, N.A., and Bella's homeowner's association lien. Debtor sought to "strip off" the lines of U.S. Bank, N.A. and Bella. The Debtor asserted the related Nevada statute
The Debtor was retired and her sole sources of income are retirement income and rental income from 2 parcels of real property in Nevada. Debtor sought to "strip off" the asserted homeowners' association lien of Bella. The Debtor asserted that the related Nevada statute does not grant Bella lien priority ahead of the holder of the first position Deed of Trust; moreover, that Bella's CC&R specifically state that its lien is subordinate to the first position Deed of Trust. Bella asserted that the clause within conflicted with its interpretation of the Nevada statute; therefore, the Nevada statute controlled. The bankruptcy court relied on two decisions in Florida that has a similar statutes related to homeowner's association lien priority. In both of those decisions, the homeowners associations did not have a superior priority lien over the first position Deed of Trust. After the entry of the respective orders by the bankruptcy court, the Nevada Supreme Court ruled that pursuant to N.R.S. 116.3116(2) homeowner's associations' liens are split into superpriority and subpriority. The superpriority piece consists of the last 9 months of unpaid dues, maintenance, and nuisance-abatement charges. The subpriority piece is all other association fees.
KURTZ, DUNN and JURY, Bankruptcy Judges

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